Standard & Poor’s stripped Alberta of its AAA credit rating in December, while Dominion Bond Rating Service (DBRS) and Moody’s have revised their rating outlook to negative from stable.

The spread between the yield on Alberta’s 10-year bond and the Government of Canada’s 10-year benchmark has widened from 65 basis points nearly a year ago to 122.5 basis points on Wednesday, its widest since the oil shock began.

“There is a lot of bad news already baked into current spreads,” said Calder. “There is really good value there and we have been progressively adding to our position.”

Alberta’s left-leaning New Democratic Party government, elected in May, said in October it would borrow heavily to fund infrastructure in a bid to support the economy.

However, the expected increase in the bond supply has been largely reflected in the market, said Greg Nott, chief investment officer at Russell Investments Canada.

“We have been buying Alberta bonds. We do see some value at these levels and have been increasing our position,” Nott added.

Alberta bonds have also performed poorly compared with other Canadian provinces.

Its 10-year yield has swung from 18 basis points below Ontario’s 10-year bond to 13 basis points above, reflecting underperformance against a province with a less energy-reliant economy.

“We think that spread is relatively attractive,” said Ed Devlin, head of the Canadian portfolio management team at Pacific Investment Management Co.

To be sure, another leg lower in crude oil prices could trigger further widening in Alberta’s spreads.

However, some analysts and investors noted the province begins from a strong financial position given its low debt burden.

Its debt-to-GDP ratio is just 4 percent, which the finance minister has said will be capped at 15 percent. DBRS expects debt-to-GDP to exceed 15 percent, but its measure includes the debt of a provincial authority and crown corporation.

“The province has a lot of capacity to deal with the downturn,” said Hosen Marjaee, senior managing director, Canadian fixed income, at Manulife Asset Management. (Editing by Jeffrey Hodgson and Lisa Shumaker)